Both gold and the yen have trended closely together since the equity markets peaked in October 2007 and the financial crisis unfolded over the next two years. While gold set its closing high eight weeks before the yen in 2011, it subsequently followed its downside breaks with varying lags of several weeks. From a performance perspective, both assets declined around 40 percent (yen 40% & gold 45%) from their respective cycle highs in 2011.
On a weekly timeframe, the yen is working on its first close above the broad range established since the end of 2014.
We included two charts below (Daily & 60 minute) that use the yen as a prospective guide for gold over the next month. As with most comparative charts, we incorporate the view not as an expected literal reflection of a markets future relative performance - but to broaden our perspective, based on how these assets have performed in the past. Using a daily chart of the yen as the leading (~ 6 weeks) asset, a large shakeout before a resumption of the uptrend would be the pattern to watch for over the next several weeks.
And just as the financial sector has come under significant pressure in recent weeks, the miners have taken the outperformance baton from the banks, that in Q3 2011 finally caught a bid as the inflation driven market theses were cresting and turning down.
Generally speaking, we still find precious metals very attractively positioned going forward, assuming 1) the dollar cyclically turns down; 2) inflation keeps its foothold, 3) nominal yields remain historically low, and hence - real yields decline.
All things considered, with financial markets likely remaining under pressure this year and central banks broadly limited, we see no reason to believe that real yields won't ultimately test their respective 2011 lows, which augurs that another significant move higher still remains on the horizon for precious metals.